The dog, owned by Nicholas Evans, bit the officer on Pride Hill on April 22.
Evans, 51, admitted being in charge of a dog dangerously out of control at Telford Magistrates Court yesterday.
He was ordered to pay compensation to the officer, but the dog's life was spared after nearly 300 people signed the petition calling for the authorities to keep the dog alive.
Evans, of no fixed abode, pleaded guilty at Telford Magistrates Court to being in charge of a dog dangerously out of control and said he fully admits the dog was at fault.
He was ordered to pay £150 compensation to the officer, was given an 18-month conditional discharge, and a contingent destruction order was put on the dog, meaning it is to be on a lead and muzzled at all times.
Abigail Hall, prosecuting, said: "Police received a call of disruption in Shrewsbury town centre on Pride Hill.
"This caused a crowd of bystanders, including Evans and his dog, Avril, to gather around officers attempting to arrest a female.
"While the officer was trying to make the arrest the dog bit him to which he describes as being in excruciating pain as it tried to rip the flesh from his arm.
"CCTV captured the incident and saw the dog, off the lead, then run and bite another bystander, who did not report it."
The officer involved was taken to hospital where he received X-rays and tetanus injections.
Evans admitted he was the owner of the white, mixed breed dog, and said he was knocked to the ground by the officer which then led to the dog attacking.
He has previously been given a dog control order on Avril and been found to be in possession of another dog dangerously out of control.
Emma Lineton, mitigating, said: "Mr Evans finds himself in a terribly unfortunate set of circumstances.
"He has been homeless in Shrewsbury for a couple of years now, and therefore has built a very good relationship with the officer involved over this time and is very upset about the injuries he sustained.
"Avril was on a lead until the officer making the arrest knocked into him causing him to fall to the ground and the lead to slip from his hand.
"He fully accepts the dog was out of control once this happened.
"He has had Avril, now four-years-old, since he birthed her in his own hands, and to his credit he has already gone out and bought a muzzle to put on her.
"I have two references from people that know Mr Evans and a petition signed by more than 200 people of Shrewsbury to keep Avril from being destroyed."
Chairman of the bench Dean Firmin said: "The dog is your companion and dare I say it, your best friend.
"From what we've read on the petition, we don't believe the dog has ever been trained as a weapon, nor that it has been taught to be aggressive.
"What we will say however, is that you should have walked away from the incident and not just become another bystander. It was not your argument to get involved with.
"You've had plenty of public support on this as I can see from the comments, some of which read: 'Avril has only ever behaved as she should', 'It would be an outrage to put the dog down' and 'The dog has never been anything but friendly' - I could go on.
"You will receive an 18-month conditional discharge, which is effectively for your dog as well. If anything else were to happen regarding Avril there's no doubt she would most likely be destroyed. Nothing else can happen.
"You will pay compensation to the officer, as nobody should have to go through that when attempting to do their job."